ED Rules on 21,500 Borrower Defense Claims Using New Tiered System

By Erin Powers, Communications Staff

The Department of Education (ED) yesterday announced it is instituting a new "tiered relief" process for borrower defense to repayment claims. As of Wednesday, ED has used the new system to rule on 21,500 pending claims filed by students from the now-defunct Corinthian Colleges—8,600 of which were denied. Of the 12,900 that were approved, some have qualified for full relief, while others will receive partial relief based on the perceived value of the education received, as determined by comparing students’ current earnings with those of their peers from passing gainful employment (GE) programs.

Since the Trump administration took office in January, approximately 95,000 unreviewed borrower defense claims had accumulated. On day two of last month’s three-day negotiated rulemaking session convened to rewrite borrower defense to repayment regulations, Acting Under Secretary of Education James Manning told the rulemaking committee that the slow progress in processing the claims was due to the “inadequate infrastructure” in place for settling claims, but that ED would soon begin issuing decisions on some of those claims.

Under the new system, students will receive full relief as a result of their claims only if their earnings are currently less than 50 percent of their counterparts’ from passing GE programs. Students earning at least 50 percent of what their peers earn from programs that pass GE standards will be compensated proportionally for the difference.

According to ED, the claims settled yesterday accounted for more than 20 percent of the claims that had been outstanding and all Corinthian Colleges students’ claims have now been processed.

"We have been working to get this right for students since day one," Education Secretary Betsy DeVos said yesterday in the press release. "No fraud is acceptable, and students deserve relief if the school they attended acted dishonestly. This improved process will allow claims to be adjudicated quickly and harmed students to be treated fairly. It also protects taxpayers from being forced to shoulder massive costs that may be unjustified."

Discharge or denial notices will be sent to borrowers on a rolling basis as their claims are reviewed and finalized and “to mitigate the inconvenience for how long it has taken to adjudicate claims, the Department will apply a credit to interest that accrues on loans starting one year after the borrower defense application is filed,” the press release said.


Publication Date: 12/21/2017

David S | 12/21/2017 1:26:03 PM

A few state attorneys general are of the legal opinion that the partial relief is not permissible under current law. This will be interesting to watch.

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